Share dealing: 4 crucial mistakes to avoid

Avoiding common mistakes when trading stocks and shares is crucial in making money from this endeavour

09:08 24 January 2013

A lot of people have amassed thousands and even millions of pounds from trading stocks and shares. However, there are some that are still struggling to make money from this industry. Some are even losing their investment because they commit costly mistakes.

Some of the costly mistakes that you need to avoid are the following:

Overtrading

A lot of traders commit the mistake of overtrading. They see several stocks rising and they buy and buy until they realize that they bought shares from several companies. Although diversifying funds is very good when it comes to share dealing, buying too many stocks isn’t recommended. Why? It’s because it is too difficult to monitors all these stocks all at the once.

Not diversifying

Although overtrading isn’t good, not diversifying your funds isn’t also right. This is when you buy very few stocks from companies. The danger in doing this is if the industry you choose encountered unfortunate events, you’ll lose a lot of your investments. This is something that you would want to avoid at all cost.

Not assessing the market

As a trader, it’s crucial that you understand the stock market. You need to know the factors that can lower or increase the stock prices. If you’re clueless, you’re most likely to lose in this game. Have a technical background before you trade your hard earned money or get independent financial advisor to help you out.

Not calculating risks

Keep in mind that buying and selling shares have risks. For you to make money or for you to grow your investments, you need to know how to calculate these risks. If buying a certain stock gives your more risk of losing than winning, then, forget about it.